SEOUL (Yonhap) -- The fate of an inter-Korean joint industrial zone in North Korea has become uncertain as Pyongyang threatened on April 21 to withdraw preferential contracts waiving land fees and guaranteeing cheap labor for South Korean factories operating there.

The North also urged the South to decide quickly on whether to normalize the joint Kaesong industrial complex, located just north of the Demilitarized Zone, or close it down completely.

The announcement was given to South Korea during the first inter-Korean government talks in more than a year, held in the North Korean border town of Kaesong. Demanding negotiations for operational changes at the Kaesong industrial complex, the North said it plans to scrap benefits for South Korean firms.

The meeting lasted just 22 minutes after a delay of more than 12 hours due to procedural disputes.

The North "will review systematic special benefits it has given to the South for the Kaesong industrial complex project," said the North Korean document, released by South Korea's Unification Ministry, referring specifically to low wages for the North's workers at the complex and the absence of land fees.

"Negotiations will begin," it said. "The South will have to respond sincerely to required meetings."

The seven-member South Korean delegation, led by Kim Young-tak, director general of the Kaesong Industrial Complex Project Bureau under the Unification Ministry, returned home after exchanging documents with its North Korean counterpart.

The North proposed the meeting, saying in a hand-delivered message last week that it had an "important notice" to give regarding the Kaesong complex. The talks were the first official inter-Korean governmental contact since South Korean President Lee Myung-bak was inaugurated in February last year. Cross-border ties have markedly deteriorated under his government, which has called on North Korea to take concrete steps towards nuclear disarmament if it wishes to receive further aid.

Ministry spokesman Kim Ho-nyoun said that Seoul had put top priority on the issue of a South Korean worker detained in the complex for more than three weeks on charges of criticizing North Korea's political system and luring a North Korean female employee to defect. The South Korean officials asked for access to the employee of Hyundai Asan, which developed the Kaesong complex, but the North refused to discuss the matter, the spokesman said.

"We regret that we could not produce results due to North Korea's obstinate attitude and are very sorry for his family," the delegation chief said in a statement.

According to the statement released by South Korea after the meeting, North Korea said it will revise the contract on the land lease at the Kaesong industrial complex, which had waived fees until 2014.

Wages for North Korean workers at the complex will also be adjusted, according to the statement.

In response, South Korea urged the North to stop raising tension but also said it saw the talks as providing new momentum to inter-Korean dialogue.

Seoul said it pointed out that its planned participation in the U.S.-led Proliferation Security Initiative is an issue involving global security, a value "shared by all mankind." The North has repeatedly warned that Seoul's increased role in the campaign, which is known to target North Korea and Iran, would be seen as tantamount to a "declaration of war."

The delegation also stressed that the North's prolonged detention of the South Korean employee violated inter-Korean accords governing the complex and urged the North Korean side to turn the detainee over to the South immediately. It also urged the North Korean side to withdraw restrictions on border crossing and the duration of stay of South Korean workers at the complex that it have been enforced since Dec. 1 and called on North Korea to immediately halt its propaganda campaign of slander and libel against Seoul's chief of state.

South Korea then proposed a new round of talks between the two sides to resolve current issues, including access to the Kaesong complex by South Korean workers and the duration of their stay at Kaesong.

The joint venture, an hour's drive from Seoul, is the last remaining inter-Korean reconciliatory project, launched by the Kim Dae-jung administration and opened by his successor Roh Moo-hyun. More than 100 small South Korean factories operate there, employing about 39,000 cheap but skilled North Korean workers in the production of garments, utensils and other small, labor-intensive items.

South Korean firms pay an average of between US$70-$80 a month to North Korean employees, but the wages are wired directly to North Korean government accounts. The annual wages last year amounted to $26 million, according to ministry data.

The Seoul government and South Korean businesses have invested 730 billion won (US$548 million) in the venture since it opened in 2005.

North Korea initially set a 10-year grace period on rent, allowing the South Korean firms to use the land for free until 2014. In the latest talks, it said it will start charging fees next year.

The brief meeting came amid heightened tension over Pyongyang's continued military threats against Seoul and the U.N. Security Council's condemnation of the North's April 5 rocket launch. In response, the North kicked out international nuclear monitors and quit the six-party denuclearization talks.

In an initial statement release after the talks, South Korea made no mention of whether the issue of its planned participation in the PSI was raised with the North. It quickly emerged, however, that the North had in fact warned Seoul against enlarging its role in the campaign.

President Lee, in an emergency security meeting convened soon after the South Korean delegation's return, reaffirmed Seoul's decision to become a full member of the PSI but did not specify when it will be officially announced. "Our position remains unchanged that (South Korea) will join the PSI," Lee was quoted as saying by one of the officials who attended the emergency meeting.

In comments made prior to the meeting, The United States urged North Korea to take steps to improve inter-Korean ties and rescind its decision to expel international nuclear inspectors. "We've said for quite a long time that we'd like to see dialogue between North Korea and the Republic of Korea," State Department spokesman Robert Wood said. "And we hope future discussions between both will be fruitful and we urge the North to take a very positive and good-faith approach to dialogue with the South."